Tradeway offers a unique approach to trading by allowing users to define their desired Risk amount and Multiplier. This method ensures that users can fully control how much they are willing to risk and manage their finances more effectively. Below is a detailed explanation of how this system works.
What is the Risk?
The Risk is the total amount in USDT that you are willing to risk on a trade. This is a free-entry number, but it must be at least 5 USDT and have up to two decimal points.
After you enter your desired Risk, Tradeway dynamically calculates options for Multipliers to ensure that your trade complies with market requirements, such as minimum quantities.
Understanding Multipliers
A Multiplier determines the number of shares or units you can purchase based on your Risk. Selecting a Multiplier indirectly selects the purchase quantity of the asset you wish to trade. Since each asset on Tradeway has a defined minimum trading amount and step size, Multipliers are dynamically calculated to meet these requirements. If the market moves in the positive direction, the higher multiplier will result in a higher payout.
Let’s walk through a complete example:
You want to trade NVDA stock, currently priced at $140.
You enter a Risk amount of $20.
Tradeway calculates the minimum Multiplier as 7:
Risk $20 x 7 = $140 (enough to purchase one share of NVDA).
If you select a Multiplier of 14, your position size increases to two shares, and your Liquidation Price will be adjusted closer to the current market price.
Slippage Disclaimer
Please note that market conditions such as volatility and liquidity may cause the actual execution price to differ slightly from the displayed price. This phenomenon, known as slippage, can affect the outcome of your trades, particularly when using higher Multipliers. Be aware of potential variations and plan your trades accordingly.
Calculating Liquidation Price
The Liquidation Price, or Stop Loss price, is automatically calculated based on your selected Risk and Multiplier. This price indicates the level at which your trade will be automatically closed to limit your losses.
The higher the Multiplier, the closer the Liquidation Price will be to the current market price. This is because a higher Multiplier means a larger position size relative to your Risk amount, which results in less room for price fluctuation before reaching your risk limit.
Scenario 1: Buying 1 NVDA
If you purchase 1 NVDA at $140, your total position size is $140.
To risk $20, the Liquidation Price is calculated as:
Liquidation Price = Current Price - (Risk Amount / Traded Quantity).
Liquidation Price = $140 - $20 = $120.
Scenario 2: Buying 5 NVDA
If you purchase 5 NVDA at $140 each, your total position size is $700.
To risk $20, the Liquidation Price is calculated as:
Liquidation Price = Current Price - (Risk Amount / Traded Quantity).
Liquidation Price = $140 - ($20 / 5).
Liquidation Price = $140 - $4 = $136
In a nutshell, the Risk represents your participation in the position. Once the position value drops for the set Risk, we'll close your position to limit your losses.
Can Risk be updated?
If you wish to update your desired Risk for the Open Position, navigate to the Position Details modal, enter the desired Loss or Stop Loss price, and update the position.
